Reed Smith Client Alerts

The Third Circuit’s recent opinion in the case of Marissa Bibbs v. Trans Union LLC is a major victory for creditors and credit reporting agencies in the ongoing battle against claims of inaccurate or misleading credit reports asserted under the Fair Credit Reporting Act (FCRA). Bibbs originated from three separate district court cases brought by student loan borrowers who eventually stopped making payments on their loans. Their respective lenders closed their accounts and transferred their loans. The borrowers claimed that the subsequent credit reporting, comprised of a negative “Pay Status” notation of “Account 120 Days Past Due,” coupled with the reporting that the accounts had been closed, transferred, and had an account balance of zero, was misleading. Specifically, the borrowers complained that if an account has a zero balance, it is impossible to also report the pay status as late. The district courts dismissed all of the borrowers’ cases without discovery.

On appeal, the borrowers urged the Third Circuit to view the pay status entries “myopically,” arguing that even if the credit reports would not mislead a “reasonable creditor,” other viewers of the report could be misled. The credit reporting agency, on the other hand, argued that the trial courts had properly applied the “reasonable creditor” standard in concluding that reasonable creditors would think the pay status notations were only historical.